Analysts' eyes on Electronic Arts heading into Investor Day "Game On" is The Fly's weekly recap of the stories powering up or beating down video game stocks.
NEW RELEASES: This week's notable release is the PC port of Square Enix (SQNXF) role-playing game "Final Fantasy XVI," which first came out exclusively for PlayStation 5 (SONY) on June 22, 2023. The PC port launches September 17. Meanwhile, Capcom's (CCOEY) "Dead Rising Deluxe Remaster," a remake of 2006 zombie action game "Dead Rising," launches for PC, PlayStation 5, and Xbox Series X/S (MSFT) on September 19.
INTEL/AMD/PLAYSTATION 6: Intel (INTC) lost out to AMD (AMD) and TSMC (TSM) in 2022 on a contract to design and fabricate Sony's PlayStation 6 chip, a major blow to its contract manufacturing unit as a deal could have amounted to billions of dollars of revenue and fabricating thousands of silicon wafers a month, Reuters' Max A. Cherney reported Monday. A dispute over how much profit Intel stood to take from each chip sold to the Japanese electronics giant blocked Intel from settling on the price with Sony, according to two sources. Instead, AMD landed the contract through a competitive bidding process that eliminated others such as Broadcom (AVGO), until only Intel and AMD remained. An Intel spokesperson said: "We strongly disagree with this characterization but are not going to comment about any current or potential customer conversations. We have a very healthy customer pipeline across both our product and foundry business, and we are squarely focused on innovating to meet their needs."
EA INVESTOR DAY: Ahead of Electronic Arts' (EA) Investor Day on Tuesday, MoffettNathanson said the day comes at an "interesting inflection point" for both the company and the industry at large. AI is center stage for video game publishers, growth in the console and PC markets has slowed, layoffs and studio closures "viscerally" embody the struggle, and EA and Take-Two (TTWO), by their nature, are more insulated than smaller players, the analyst told investors in a note. Unfortunately, the recent era hasn't been a gold rush, either, the analyst said, noting that the last time EA hosted an Investor Day in 2016, it had come off a multi-year run marked by extraordinary margin expansion.
The analyst added that the big money in EA has been made in period of a clear margin expansion story. Maybe generative AI can help with that, but EA will need to "clearly" make that case for the firm to get more bullish, the analyst said.
Meanwhile, Jefferies expressed a more optimistic outlook on EA ahead of the Investor Day, with the expectation of answering many unknowns on title cadence and bookings growth in fiscal 2026 and beyond to support the existing margin story. The firm sees hard number targets unlikely, but would view a multi-year guide of high single-digit percent Bookings and low double digit percent earnings per share favorably. The bear case, the analyst added, would be no visibility into fiscal 2026 content.
'THE SIMS' NEWS: Amid Electronic Arts' Investor Day, Variety's Jennifer Maas reported that the game maker has confirmed the existence of a film adaptation of "The Sims" from Amazon MGM Studios (AMZN). EA formally announced the project Tuesday, along with a slew of other reveals about the future of "The Sims" franchise, which is being produced by "Barbie" star Margot Robbie's production company LuckyChap with Kate Herron, who helmed "Loki," set to direct the movie and co-write with Briony Redman.
Additionally, Electronic Arts said it has no plans to release "The Sims 5" as a successor to the game maker's current free-to-play title "The Sims 4," according to Maas. Instead, "Sims 4" will continue to get new updated content and paid expansions, including one update in the form of "Creator Kits" for players seeking to develop their own custom content for the game to sell to other players. EA's vice president and general manager of "The Sims" franchise Kate Gorman told Variety that the decision not to make a "Sims 5" was that the current version of the game already has an enormous player base worldwide.
Click here to check out recent Media Buzz Sentiment on Electronic Arts as measured by TipRanks.
MORE MICROSOFT NEWS: Last week, Microsoft laid off 650 employees from its gaming business, according to a memo sent by Xbox chief Phil Spencer to staff, IGN's Wesley Yin-Poole reported. According to the memo, Spencer said the roles affect mostly corporate and support functions, and were made "to organize our business for long term success." He added that no games, devices or experiences are being canceled and no studios are being closed as part of these cuts. Microsoft has let go of 2,550 staff from its gaming business since acquiring Activision Blizzard for $69B in 2023, IGN noted.
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